www.bea.gov

The Importance of, and Challenges to, Incorporating

Distributional Information Into Macroeconomic DataJ. Steven Landefeld, Director

NABE Statistics Committee MeetingNovember 8, 2012

www.bea.gov

Why It’s Important

▪ Existing national accounts and other macro-economic data fail to present a consistent picture of the differential impact of economic growth and change across households, regions, and industries.

Such data are important for understanding the economy and the political economy.

Such data are, in turn, important in informing economic policy, business planning, and social policy.

The causes of, and response to, the “Great Recession” and the recent election are just two examples of the importance of such data.

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www.bea.gov

Why It’s Important

▪ In a time of scarce statistical resources and increasing demand for data, we need to more effectively integrate household survey and tax and other administrative data into our national accounts.

BEA/Census/SOI Data - Reconciliation of aggregates and distribution of income

BEA/BLS/SOI Data – Reconciliation of aggregates and distribution of consumer spending

Future work FRB/BEA Data – Distribution of household assets and

liabilities3

www.bea.gov

Distributional Information Needed for Effective Economic Policy

Analysis▪ Potential impact of changes in the distribution of income

on the economy: According to research by Dynan, Skinner, and Zeldes, MPS of the

top 1% is about 50%, rest is about 10% (including capital gains). According to CEA, increase in top 1% share might have lowered PCE by

5%. Expansion of credit and changes in underwriting standards and the

recipients of that credit may have played a role in the housing bubble.

Housing losses and restrictions on credit may have disproportionally affected lower income groups’ spending during the contraction and expansion.

▪ In an attempt to get at what “most” households are experiencing, several investment banks developed measures of discretionary spending.

▪ ACCRA has developed a rough regional price to better assess the health of the economy across MSAs.

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www.bea.gov 5

Are You Better Off?

CP

S-A

SE

CH

ou

seh

old

In

com

e

Dis

po

sab

le h

ou

seh

old

In

co

me

1999-2009-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

9.6

-5.0

Real personal income per capita Real median household income (Census Bureau)

Chan

ge (%

)

Source: BEA, Census Bureau

www.bea.gov 6

Measuring Distribution of Income

CP

S-A

SE

CH

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old

In

com

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Dis

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le h

ou

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old

In

co

me

2006

Lowest quintile 2nd quintile Middle quintile 4th quintile Highest quintile0

10

20

30

40

50

60

70

Money income (Census Bureau) IRS adjusted gross income

Perc

ent o

f tot

al

Source: McCully, Clint. “Integration of Micro and Macro Data on Consumer Income and Expenditures.“ October 2012.

www.bea.gov 7

Measuring Distribution of Income

CP

S-A

SE

CH

ou

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old

In

com

e

Dis

po

sab

le h

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old

In

co

me

Lowest quintile 2nd quintile Middle quintile 4th quintile Highest quintile0

10

20

30

40

50

60

70

Money income (Census Bureau) IRS adjusted gross income

Perc

ent o

f tot

al

2009

Source: McCully (2012)

www.bea.gov 8

Adjustments to Household Income

CP

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SE

CH

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old

In

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me

1999-20090.0

0.5

1.0

1.5

2.0

2.5

3.0

2.6

0.8

Real median household income (NIPA adjusted) Real median household income (SOI adjusted)

Chan

ge (%

)

Source: Fixler, Dennis and David S. Johnson. “Accounting for the Distribution of Income in the U.S. National Accounts.“ September 2012.

www.bea.gov

0

0.2

0.4

0.6

0.8

1

9

Consumption Coverage Ratios

Ratio of CES values to adjusted NIPA household consumption expenditures (HCE) for selected estimates

Ow

ner-

occu

pie

d

ren

t

Hou

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old

fu

els

Pu

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&

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ear

Rest

au

ran

ts/

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ls

Alc

oh

ol/

hom

e

Self-reported

Regular housing-related expenditures well reported

Large irregular expenditures well-reported

“Sin” expenditures not well-reported

Small frequently purchased items not well reported

Source: McCully (2012)

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Distribution of Spending

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Household Consumption Expenditures by Quintiles, 2010

Lowest Second Third Fourth Highest Overall

Total............................................................................................................... 14.1 16.3 18.9 22.2 28.6 100.0 Food and beverages purchased for off-premises consumption...................... 18.6 19.3 18.8 20.8 22.5 100.0 Clothing, footwear, and related services....................................................... 17.9 18.1 17.7 18.7 27.7 100.0 Housing, utilities, and fuels........................................................................... 15.0 17.3 19.7 22.4 25.6 100.0 Furnishings, household equipment, and routine household maintenance..... 14.2 14.9 17.2 22.9 30.9 100.0 Health........................................................................................................... 11.2 18.8 22.1 22.8 25.1 100.0 Transportation.............................................................................................. 13.9 15.8 19.0 24.5 26.9 100.0 Communication............................................................................................ 16.7 19.3 20.1 22.1 21.8 100.0 Recreation.................................................................................................... 16.2 14.2 17.2 23.4 29.0 100.0 Education...................................................................................................... 10.3 7.7 11.2 19.8 51.0 100.0 Food services and accommodations.............................................................. 13.7 14.3 17.5 22.1 32.3 100.0 Financial services and insurance.................................................................... 8.6 10.7 15.1 20.2 45.5 100.0 Other goods and services.............................................................................. 16.0 16.9 20.6 21.3 25.2 100.0

Total............................................................................................................... 100.0 100.0 100.0 100.0 100.0 100.0 Food and beverages purchased for off-premises consumption...................... 10.4 9.3 7.8 7.4 6.2 7.8 Clothing, footwear, and related services....................................................... 4.6 4.0 3.3 3.0 3.5 3.6 Housing, utilities, and fuels........................................................................... 21.1 21.0 20.6 20.0 17.7 19.8 Furnishings, household equipment, and routine household maintenance..... 4.3 3.9 3.9 4.4 4.6 4.3 Health........................................................................................................... 14.6 21.3 21.5 18.9 16.1 18.4 Transportation.............................................................................................. 10.3 10.1 10.4 11.4 9.8 10.4 Communication............................................................................................ 2.9 2.9 2.6 2.4 1.9 2.4 Recreation.................................................................................................... 10.8 8.2 8.5 9.9 9.5 9.4 Education...................................................................................................... 1.9 1.2 1.5 2.3 4.6 2.6 Food services and accommodations.............................................................. 6.2 5.6 5.9 6.3 7.2 6.3 Financial services and insurance.................................................................... 4.9 5.3 6.4 7.3 12.8 8.1 Other goods and services.............................................................................. 8.0 7.3 7.6 6.7 6.2 7.0

Share of consumption by quintile

Consumption shares within quintiles

Source: McCully (2012)

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Relevant BEA Projects

Research on the reconciliation and incorporation of income distribution data as supplemental annual data on personal income

Research on the reconciliation and incorporation of consumer spending distribution data as supplemental annual data on personal outlays and spending

Quarterly data on the distribution of GDP by industry

Prototype annual real personal income by state

Longer-term: Integrated distributional information on the distribution of

production, spending, and wealth

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